Pr. Commissioner Of Income Tax vs. Micro And Small Enterprise Facilitation Council And Anr.

Facts

The Principal Commissioner of Income Tax (Petitioner) challenged directions for arbitration issued by the Micro and Small Enterprise Facilitation Council (MSEFC) (Respondent No. 1). The dispute arose from unpaid fees for Special Audits conducted by M/s SBG & Co. (Respondent No. 2), a Chartered Accountant firm registered as a 'Micro Enterprise' under the MSMED Act. The CA Firm was nominated for Special Audits under Section 142(2A) of the Income Tax Act, 1961. After completing the audits and submitting invoices, the CA Firm claimed non-payment of full fees. Consequently, the CA Firm invoked Section 18 of the MSMED Act, leading the MSEFC to refer the matter to arbitration. The Petitioner argued that the MSEFC lacked jurisdiction over claims for fees payable under Section 142(2D) of the IT Act.

Held

The Court held that the MSEFC lacks jurisdiction to deal with claims for fees arising from Special Audits conducted under Section 142(2A) of the IT Act. The Court reasoned that the IT Act is a special statute that governs the nomination of Special Auditors, the conduct of audits, and the determination of their remuneration under Section 142(2D). The relationship between the Income Tax Department and the CA Firm in this context is not a commercial transaction but a statutory nomination for the assistance of the Assessing Officer. Therefore, the IT Department cannot be considered a 'buyer' and the CA Firm a 'supplier' under the MSMED Act. The remuneration is not 'consideration' for goods or services in the commercial sense. The Court found that the MSMED Act has no applicability to such statutory assignments, and the IT Act would prevail. Consequently, the impugned references by the MSEFC to arbitration were set aside. The Court left open the remedies of the CA Firm to challenge the orders passed by the IT Department regarding the determination of remuneration.

Key Issues

1. Whether the Micro and Small Enterprise Facilitation Council (MSEFC) has the jurisdiction to entertain and refer claims for fees payable to Chartered Accountant firms for Special Audits conducted under Section 142(2A) of the Income Tax Act, 1961, and determined under Section 142(2D) of the IT Act, when the MSMED Act is invoked? Petitioner's arguments: The MSEFC lacks jurisdiction. The determination of remuneration for Special Audits is exclusively governed by the IT Act and its rules. The relationship between the Income Tax Department and the Special Auditor is not a commercial transaction of 'buyer' and 'supplier' as contemplated by the MSMED Act. The IT Act is a special statute that would prevail over the general provisions of the MSMED Act in this context. Respondent's arguments: The judgment records no specific arguments from Respondent No. 2 (CA Firm) regarding jurisdiction, but their actions indicate reliance on the MSMED Act for fee recovery. The judgment does not record specific arguments from Respondent No. 1 (MSEFC) beyond issuing the impugned orders.